Exhibit 10.3




                      AUTOMATIC DIVIDEND REINVESTMENT PLAN

                                       OF

                      BLACKROCK KELSO CAPITAL CORPORATION


                              TERMS AND CONDITIONS


         Pursuant to this Automatic Dividend Reinvestment Plan (the "Plan") of
the undersigned BlackRock Kelso Capital Corporation, a Delaware corporation
(the "Corporation"), unless a holder (a "Shareholder") of the Corporation's
common shares of beneficial interest (the "Common Shares") otherwise elects,
all dividends and distributions on such Shareholder's Common Shares will be
automatically reinvested by PFPC Inc., a Massachusetts corporation ("PFPC"), as
agent for Shareholders in administering the Plan (the "Plan Agent"), in
additional Common Shares of the Corporation. Shareholders who elect not to
participate in the Plan will receive all dividends and other distributions in
cash paid by check mailed directly to the Shareholder of record (or, if the
Common Shares are held in street or other nominee name, then to such nominee)
by PFPC as the Dividend Disbursing Agent. Participants may elect not to
participate in the Plan and to receive all dividends and distributions in cash
by sending written instructions to PFPC, as the Dividend Disbursing Agent, at
the address set forth below. Participation in the Plan is completely voluntary
and may be terminated or resumed at any time without penalty by written notice
if received by the Plan Agent not less than ten days prior to any dividend or
distribution payment date; otherwise such termination or resumption will be
effective with respect to any subsequently declared dividend or distribution.

         The Plan Agent will open an account for each Shareholder under the
Plan in the same name in which such Shareholder's Common Shares are registered.
Whenever the Corporation declares a dividend or a distribution (collectively
referred to as "dividends") payable in cash, non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in Common
Shares. The Common Shares will be acquired by the Plan Agent for the
participants' accounts through receipt of additional unissued but authorized
Common Shares from the Corporation ("newly issued Common Shares"). The number
of newly issued Common Shares to be credited to each participant's account will
be determined by dividing the dollar amount of the dividend by the net asset
value per Common Share most recently determined on or prior to the payment
date.

         The Plan Agent will maintain all Shareholders' accounts in the Plan
and furnish written confirmation of all transactions in the accounts, including
information needed by Shareholders for tax records. Common Shares acquired by
the Plan Agent on behalf of the Plan participant shall be credited to the
Shareholders' Common Share accounts maintained by the Corporation's transfer
agent.

         In the case of Shareholders such as banks, brokers or nominees that
hold Common Shares for others who are the beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of Common Shares certified
from time to time by the record Shareholder and held for the account of
beneficial owners who participate in the Plan and shall credit Common Shares
acquired for the accounts of such Shareholders to their Common Share accounts
maintained by the Corporation's transfer agent.

         There will be no brokerage charges with respect to Common Shares
issued directly by the Corporation as a result of dividends or capital gains
distributions payable either in Common Shares or in cash.

         For the avoidance of doubt, no Common Shares will be issued under the
Plan at a price less than net asset value or under any circumstance that may
violate the Investment Company Act of 1940, as amended, or any rules issued
thereunder.

VOTING

         Each Shareholder proxy will include those Common Shares purchased or
received pursuant to the Plan. The Plan Agent will forward all proxy
solicitation materials to participants and vote proxies for Common Shares held
pursuant to the Plan in accordance with the instructions of the participants.

TAXATION

         The automatic reinvestment of dividends will not relieve participants
of any federal, state or local income tax that may be payable (or required to
be withheld) on such dividends.

AMENDMENT OF THE PLAN

         The Plan may be amended or terminated by the Corporation. There is no
direct service charge to participants in the Plan; however, the Corporation
reserves the right to amend the Plan to include a service charge payable by the
participants. Notice will be sent to Plan participants of any amendments as
soon as practicable after such action by the Corporation.

INQUIRIES REGARDING THE PLAN

         All correspondence concerning the Plan should be directed to the Plan
Agent at 301 Bellevue Parkway, Wilmington, Delaware 19809, Attention:
President.

APPLICABLE LAW

         These terms and conditions shall be governed by the laws of the State
of New York without regard to its conflicts of laws provisions.

EXECUTION

         To record the adoption of the Plan as of August 4, 2005, the
Corporation has caused this Plan to be executed in the name and on behalf of
the Corporation by a duly authorized officer.

                                   By and on behalf of
                                   BLACKROCK KELSO CAPITAL CORPORATION


                                   /s/ Michael B. Lazar
                                   ------------------------------------
                                   By:    Michael B. Lazar
                                   Title: Chief Operating Officer